Ceres council directs staff to draft tiered cannabis tax and tighten enforcement of local rules

The Ceres City Council on Sept. 8 directed staff to prepare a package of measures to transition the city's cannabis pilot program into a clearer tax-and-regulatory framework.

At a presentation by City Attorney Nubia, staff summarized the city's existing pilot structure (development agreements and conditional-use permits), recent state changes to the cannabis excise tax and options for local control. Nubia said voters previously authorized the council to set a cannabis business tax of up to 15%, but the council has not yet fixed a local rate and has instead relied on negotiated development agreements for existing operators.

Council members and staff focused on three questions: whether to set a tax and at what rates; whether to cap the number of retail storefronts; and whether to keep the development-agreement/CUP model or move to a permit system. Staff noted the state excise tax recently rose (presenter noted a state change to a 25% excise tax effective July 1, 2025) and that higher local rates could push legitimate operators to struggle or leave, while lower rates could reduce short-term revenue but may attract compliance and undercut black‑market sales.

Public commenters pressed two themes: stronger enforcement against unlicensed smoke shops and concern that a tax above about 4% could drive the only consistently paying retailer to leave Ceres. "If the tax rate is anything above 4% ... PCF will move in under 90 days out of the city of Ceres," said Ron Roberts, a local business owner who said one dispensary has contributed significant revenue to the city.

Council members repeatedly said they wanted to protect the compliant retailer while also collecting revenue and improving enforcement. Several members favored keeping the DA/CUP approach for its contractual enforcement power, but asked staff to "clean up" the ordinance language to require background checks, clearer audit rights and stronger remedies for delinquent development agreements.

The council gave preliminary direction on a tiered structure: retail at 4%, manufacturing 3%, distribution 2%, laboratory testing 1%, and cultivation to be taxed on a square-footage basis (rather than a gross‑receipts percentage). Council asked staff to prepare a resolution (to set tax rates) and an ordinance (to revise code and strengthen enforcement), and to return with alternate ordinance drafts that include options on caps (no cap, keep to two retail locations, or cap at four). Staff was also asked to produce fiscal modeling and examples from neighboring jurisdictions.

The council emphasized that development agreements in force would not be altered immediately; any changes would apply when individual DAs come up for renewal or through negotiated amendments.

What happens next: staff will return with a resolution and a draft ordinance packet, including the recommended tiered rates, cap alternatives, and enforcement language for council consideration and additional public input.